How do you know the government is upset about spending all
its money on healthcare? When you're required to pay a record $2.3 billion
civil and criminal penalty over unlawful prescription drug promotions.

The U.S. Department of Justice (DOJ) recently levied the
largest criminal fine in U.S. history against Pfizer after accusing the drug
company of such things as creating false doctor requests for medical information
in order to send unsolicited information to doctors about unapproved uses and
dosages, and wining-and-dining doctors—including sending sent them on exotic
trips—all to get them to prescribe its drugs.

The government claims that Pfizer promoted prescription
drugs, such as the painkiller Bextra, as treatments for medical conditions
different than those the drugs had been approved by the U.S. Food and Drug
Administration (FDA). The use of drugs for off-label medical conditions is a
fairly routine practice, but drug companies are prohibited from marketing drugs
for uses that have not been approved by the FDA.

According to the press release by the DOJ: "Pharmacia &
Upjohn Co. (a Pfizer subsidiary) has agreed to plead guilty to a felony
violation of the Food, Drug and Cosmetic Act for misbranding Bextra with the
intent to defraud or mislead. Bextra is an anti-inflammatory drug that Pfizer
pulled from the market in 2005. Under the provisions of the Food, Drug and
Cosmetic Act, a company must specify the intended uses of a product in its new
drug application to FDA. Once approved, the drug may not be marketed or
promoted for so-called 'off-label' uses—i.e., any use not specified in an
application and approved by the FDA. Pfizer promoted the sale of Bextra for
several uses and dosages that the FDA specifically declined to approve due to
safety concerns. The company will pay a criminal fine of $1.195 billion, the
largest criminal fine ever imposed in the United States for any matter.
Pharmacia & Upjohn will also forfeit $105 million, for a total criminal
resolution of $1.3 billion."

In addition, Pfizer has agreed to pay $1 billion to resolve
allegations under the civil False Claims Act that the company illegally
promoted four drugs—Bextra; Geodon, an anti-psychotic drug; Zyvox, an
antibiotic; and Lyrica, an anti-epileptic drug—and caused false claims to be
submitted to government healthcare programs for uses that were not medically
accepted indications and therefore not covered by those programs.

The civil settlement
also resolves allegations that Pfizer paid kickbacks to healthcare providers to
induce them to prescribe these as well as other drugs. The federal share of the
civil settlement is $668,514,830, and the state Medicaid share of the civil
settlement is $331,485,170. This is the largest civil fraud settlement in
history against a pharmaceutical company.

Pharmacia and Upjohn entered an agreement to plead guilty to
one count of felony misbranding over the promotion practices for Bextra (i.e.,
the guilty plea was not in Pfizer's name). Bextra is a Cox-2 inhibitor pain
medication that was pulled from the U.S. market due to the risk of heart
attack, stroke and death.

Other inappropriate drug promotions involved the nerve pain
and epilepsy treatment Lyrica, schizophrenia medicine Geodon, antibiotic Zyvox
and nine other medicines. Under terms of the settlement, Pfizer must pay $1
billion to compensate Medicaid, Medicare and other federal healthcare programs,
some of which will be shared among the states.

The best tidbit to come out of the investigation was the
revelation that former sales manager Thomas Farina, who is doing six months of
hard home confinement with an electronic ankle bracelet for his role in the
case referred to his team as "the Highlanders"—a reference to a movie and TV
show about a cult of immortals living secretly among us who must kill or be
killed. Farina signed his e-mails, "There can be only one," a reference to the
motto of the show.

Highlighting that the Obama administration is serious about
cutting expenses, Associate Attorney General Tom Perrelli noted that: "Because
healthcare fraud is such a significant problem for the public and the federal
[budgets], the Justice Department and HHS recently invigorated our longstanding
partnership in fighting healthcare fraud by launching the Health Care Fraud
Enforcement Action Team—or HEAT—earlier this year. This working task force is
led by key senior-level leadership in both agencies and has already increased
coordination and intelligence data-sharing between the agencies, and has
secured indictments charging dozens of defendants with healthcare fraud
offenses."

In an earlier announcement that actually helped distract
attention from the settlement, Pfizer announced plans to acquire Wyeth for $68
billion. That deal is expected to close before the end of the year.

Stephen Albainy-Jenei is a patent attorney at Frost Brown
Todd LLC, serving up chat at PatentBaristas.com. Write him with comments or
questions at Stephen@patentbaristas.com. Albainy-Jenei doesn't own shares of
companies mentioned in this article.